Up to 250,000 people could lose their jobs by mid-2027 as the UK “flirts with recession”, according to analysis from the EY Item Club. The warning follows a collapse in business confidence triggered by the US-Israel war on Iran and the subsequent closure of the Strait of Hormuz, which has sent oil and gas prices soaring.
The EY Item Club forecasts the UK economy will flatline in the second and third quarters of this year, risking a technical recession. Growth is expected to halve from 1.4% in 2025 to 0.7% this year. Unemployment is projected to rise from 5.2% to 5.8%, adding nearly 250,000 to the jobless total, which would increase from 1.87 million to over 2.1 million.
Chancellor Rachel Reeves has summoned bank chiefs for talks to contain the economic fallout. A separate report from Deloitte found that confidence among chief financial officers slumped to a net -57% in March, the lowest since the start of the Covid-19 pandemic. CFOs cited geopolitical developments as the greatest external risk, with 61% concerned about energy costs and inflation.
Matt Swannell, chief economic adviser at the EY Item Club, said: “Spiralling energy costs and disruption to supply chains will push the UK to the brink of a technical recession. Consumers’ spending power will be squeezed, while more expensive financing and global uncertainty will dampen investment plans.” Inflation is expected to rise to nearly 4% in the second half of 2026, double the Bank of England’s target.
Deloitte’s Ian Stewart noted: “Rarely in the last 16 years have UK CFOs been more focused on cost control. The immediate priority is to strengthen balance sheets in the face of external headwinds.” The International Monetary Fund recently downgraded UK growth forecasts to 0.8% for 2026, the biggest cut among G7 nations.
